Wednesday 27 June 2007 19.08 EDT
First published on Wednesday 27 June 2007 19.08 EDT

Any self-respecting tycoon needs a good luxury yacht on which to entertain. During the opening weekend of the Venice Biennale earlier this month, flashy vessels were moored bow-to-stern in the lagoon, providing a spectacle in their own right at the entrance to the world's most important art exhibition. The Biennale is not supposed to be about buying art. But it is, increasingly, about window-shopping. The billionaire art collectors were in town - and they weren't afraid to flaunt their bling.

Contemporary art's popularity among those with mega-bucks, its intense fashionability, is reflected with precision in the salerooms. Last week's London auctions told a clear story of a fabulously buoyant market. The papers gleefully reported records toppled, a Damien Hirst medicine cabinet becoming, at £9.65m, the most expensive work by a living artist ever auctioned in Europe.

There are plenty who applaud this buoyancy. It means artists are increasingly able to make a decent living. And the desirability of contemporary art is inextricably linked to its place in culture at large: it is accepted as part of the mainstream as never before. Dealers say that there is a trickle-down effect: if they have one or two very successful artists in their stable, that in effect allows them to subsidise those who produce less commercial work. But there is undeniably a wealth divide, which cuts several ways: between collectors and artists; between artists who can command great prices and those who are less commercially successful; and, perhaps most damagingly for ordinary art-lovers, between wealthy individuals and public institutions.

One effect of the gap is to shift the way the art world is constituted a notch towards the predilections of the collectors. Events such as the Venice Biennale have less and less to do with art, and more to do with the owners of those yachts. The parties, the exclusive dinners - all this glitter, this exclusivity and preening - threatens to eclipse the slow and serious work that art is. The noise around the fantastic prices being achieved in the sales can trick us into imagining that commercial value equates to artistic value. It does not.

More worryingly, perhaps, the gap threatens to affect what artists actually create. Imagine being an art student now - the fantasy, or phantom, of a collector appearing to buy your entire degree show must be a bizarre distraction. At the other end of the spectrum, there are well-known British artists operating large, profitable studios on a Rubens-eque scale whose output, one cannot help thinking, might benefit from a slowdown in productivity.

The real problem in all this, however, is that state museums are increasingly priced out of the market. They simply cannot afford to compete. The Tate spent £4.8m on art in 2004/05, which would have bought about half that Hirst medicine cabinet. The Museum of Modern Art in New York spent £20m. If museums do not refresh their collections they stagnate, become irrelevant. They must have the capacity to buy if they are to continue the success of the past decade, with annual visitors increasing by 15 million over the past nine years. This predicament ought to be soluble. For a start, the recommendations of the 2004 Goodison Review, suggesting tax inducements as a means of encouraging philanthropy, should be quickly implemented by the Treasury. Second, the super-rich should start putting their hands in their pockets. Frick, Carnegie and Getty are remembered for giving money away, not for their prowess in making it.